1993 External T.I. 9335545 F - Sub — 256(2) and T2144

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

5-933554 XXXXXXXXXX

Attention:  XXXXXXXXXX

December 10, 1993

Dear Sir:

RE:  Subsection 256(2) and Form T2144

We are writing in response to your letter of November 29, 1993 in which you have requested clarification of the Department's position concerning the election (Form T2144) available under subsection 256(2) of the Income Tax Act.

You have noted that, although there is no legal requirement under the Act to file the election at a specific time, paragraph 8 of IT-64R3 indicates that the election must be filed by the third corporation with its return of income for the relevant year and that late-filed elections will not be accepted.

Our Comments:

We agree that the Act does not specify a filing deadline for T2144 elections made under subsection 256(2) of the Act. Paragraph 8 of IT- 64R3 reflected the Department's policy with respect to the filing of these elections at the time the bulletin was published. This policy, however, has recently changed. The Department will now accept late- filed Form T2144 elections provided that:

(a)      the T2 return of the electing corporation for the particular year is not statute-barred or, if statute-barred, the corporation did not claim any amount as a business limit for the year; and

(b)      where the T2 return for the particular year of any other corporation to which the election applies is statute-barred, there will be no revision to the amount of the business limit allocated to that corporation for the taxation year.

When it otherwise becomes necessary to revise IT-64R3, paragraph 8 will be amended to reflect this change in policy.

The foregoing comments are given in accordance with the practice of providing non-binding opinions referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental

Affairs Branch

c.c. Paul Séguin (Audit)

Issue Sheet 5-933554 Issue

Paragraph 8 of IT-64R3 indicates that Form T2144, Election Not to Be an Associated Corporation, should be filed with the third corporation's return of income for the relevant year and that late-filed elections will not be accepted. There is no legislative requirement to file this election at a specific time.

Comments

A directive signed by the Director of Audit Programs Division (Jean- Pierre Lavigne) was sent to all District Offices on October 21, 1993 advising that late-filed elections under subsection 256(2) on prescribed Form T2144 can now be accepted under certain conditions.

The policy in paragraph 8 of IT-64R3, with respect to these elections, is no longer valid and will be revised at the earliest opportunity.

Tim Bryant December 10, 1993